Lessons in CGT, Auto-enrolment, P11Ds and RTI

As a professional
adviser you can’t afford to stop learning, as the tax and regulatory
landscape is constantly moving underneath your feet. Last week we shared a
lesson to learn from CGT, and addressed the huge issue of auto-enrolment.
We also had some tips for a painless P11D season.

Auto-enrolment

Auto-enrolment is not
like VAT-MOSS, it can’t be ignored on the assumption that no one will
check whether such a small employer is complying with the rules (not
that we would recommend that!). If the employer fails to implement a
pension scheme for his employees he is messing with their future
pensions, and the penalties are severe.

There is a fixed
penalty of £400 if the employer doesn’t comply with statutory notices,
which escalates up to £500 PER DAY for employers with up to 49
employees. Those same employers can also be subject to fixed penalties
of up to £1,500 for not paying contributions or for encouraging
employees to opt out of the pension scheme. Third parties such as
payroll bureau can also be fined if the pension deductions aren’t made
correctly.

The frightening part
about auto-enrolment is that the Pensions Regulator, which is tasked
with getting the 1 million small employers who are ignorant of their
obligations to comply, believes that accountants and lawyers will bridge
that knowledge gap. That means you.

You may protest that
you don’t “do” pensions so auto-enrolment is somebody else’s problem. If
you offer a payroll service you will have to process the pension
deductions for your clients, who will expect you to get the calculations
right. Clue: it is not a matter of deducting a straight percentage of
net pay; there are options for the employer to choose which define
pensionable pay in different ways.

The employees’
employment contracts will be key to minimising the cost of the
employer’s contributions, but many employees in small businesses don’t
have detailed employment contracts. Someone (perhaps you) will have to
help those businesses work with employment lawyers and human resource
advisers to get suitable employment contracts in place.

Finally remember that
auto-enrolment pension contributions will have to be made for employees
who earn above £10,000 in 2015/16. The auto-enrolment threshold was not
increased in line with the personal allowance, so employees will pay
pension contributions before they become liable for income tax, unless
the thresholds are aligned again in the future.

This is an
extract from our tax tips newsletter dated 28 May 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
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Topical

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